Home builder confidence rises for sixth consecutive month

Builder confidence in the market for newly built, single-family homes edged slightly higher for a sixth consecutive month in October, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The latest, one-point gain brings the index to 41, its strongest level since June of 2006.

“The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets,” said David Crowe, NAHB’s chief economist.

Derived from a monthly survey that NAHB has been conducting for the past 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”

Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.